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bol lo cks mat lock,
Over 20 000 posts and you revert to old news?
You make good points there, as you say if it was a fantastic run business with good profits we wouldn't be asking these questions and getting annoyed at shorters.
Personally, I have no malice towards the shorters . Whilst I don't like the practise it's legal and they've seen an opportunity, the question is what is it they've seen? Only the FCA investigation or do they know more.
So who now thinks that wasn t a dead cat bounce? All aboard the 1.50 Express toot toot. Sell and buy back is the only strategy. Now is a good time to sell. Will go much lower. Have said that for weeks.
Additionally metro never lent out the FLS money, instead they brought RMBS’s with it. These are highly liquid, so if the funding needs to be paid back they will just sell those securities.
I think the point is that it's more expenditure on an already depressed balance sheet.
It's not about growing the business to barely cover the running costs, it's about a sustainable business model that generates sufficient profits to start something of value, then expand then reward it's shareholders ?
What's going to push the price up - only shorts closing (why) or a takeover (probably not this side of mid 2020 at best ?!)
Too many bogged down with the £40 all time high and the £5 fundraise - it's not relevant on any level for TODAY....
RBS was £6 a share in 2006, was 50p when effectively bankrupt in 2008/9 and is now 22p if you exclude the 10 for 1 swap in recent years.
Value !!!!
zaccs, good point. Thanks.
Ratknapp, that’s very useful thanks. It does highlight that this lending was part of a quantitative easing phase that is now closed. Therefore, there’s nothing that indicates a right by metro bank to rollover the deposit at the same rate.
central bank funding isnt metro specific, all banks have it and would be affected by rate changes
https://www.bankofengland.co.uk/markets/funding-for-lending-and-other-market-operations
Leisurely have a look at mtros balance sheet and you will see they have enough liquidity to manage the FLS deposit. 75bps is around the cost of mtros deposit book anyway, so if they can grow their deposits by 20% in the next year then they can repay that funding.
An article a month or so ago noted the bank was effectively being subsidised from the central bank with about £4bn funding until Dec 2020 and there was no guarantee the central bank would keep such generous terms after that date.
So I checked the H1 accounts and you can see a deposit with metro of £3,801m from the central bank at a rate of 0.75% (the base rate) and this cost metro £14.1m interest payment in H1.
Metro obviously uses this to support lending, the lending being at a higher rate allowing metro an element of guaranteed profit to support their challenger bank activities.
If metro have to replace some or all of this funding by Dec 2020 from the market they would clearly pay a higher rate. The metro prospectus that facilitated the £350 MREL requirement allows for up to £3bn to be raised through multiple issuances over the coming years. This £3bn total may have been set to partly facilitate replacement of central bank funding. We have already seen the punitive coupon achieved through this bond issuance process.
I’d suggest the negative sentiment is more than just the outstanding FCA issue; and that the replacement of central bank subsidised funding will become far more prominent an issue over the coming months (and is already part of shorter’s analysis). I say ‘subsidised’ because the funding is at exactly the base rate so the central bank have not required any margin on the deposit rate to account for metro bank’s credit risk at all.
Just thought I’d highlight it for those interested in material risks and very interested if anyone thinks this is not significant.